31 Mar 2017
Trump fails again
Markets
- Equity markets had a strong week, with the local, US and European markets finishing higher, whilst Asia was mixed.
- In local stock news, South32 announced a US$500m share buy-back over the next 12 months. It will be funded from existing cash reserves, and comes on top of a healthy first half dividend. Management sticking to their goal of returning excess cash to shareholders if no better use can be found for the money. Good to finally see from the resources sector.
- Myer’s shares rose strongly after a series of large trades saw Premier Investment Group emerge with a 11% stake, though they indicated they have no plans to launch a full takeover. Premier has always been interested in Myer at the right price and current management have done a reasonable job at cleaning up the company and reducing debt.
- Ballamy’s suffered another setback after losing registration at Bega’s canning line, which means they will miss the 1 January deadline to be registered with the China Food and Drug Administration, as it takes 6 months of testing to get registered. Without registration, they can’t sell products into in China.
Economics
- Australian job vacancies have risen for the 3rd straight month in a positive sign for the labour market with employers wanting more workers.
- It’s becoming increasingly likely that the US central bank only raises interest rates another 1-2 times this year following more rhetoric from central bank members. This means bond yields are unlikely to push too high (prices lower) from here and US dollar rises should be small. Both good for equity markets and the US economy.
- US economic growth for the 4th quarter was revised up to a 2.1% annualised pace from 1.9%. Expect this growth rate to inch higher over the coming 12 months.
Politics
- President Trump and his fellow Republicans admitted defeat in their attempt to repeal and replace the Obamacare (affordable care act). They cancelled the house vote and are moving on to tax reform. This makes the future repeal/replacement of the healthcare act much harder, whilst clearing the way for focus on tax reform (which the Republicans are very divided on). Though, they first need to clear the debt ceiling and budget hurdles. Running a company and running a country, two very different things.
- The UK officially issued their intention to leave the EU thus triggering Article 50 and the start of a 2 year process of negotiations. At the same time, lawmakers in Scotland are due to vote on a new referendum which would take place before the 2 year process comes to an end. Fair to say UK PM May isn’t impressed.
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